Abstract: A multi location inventory system composed of a depot and several bases that covers diferent geographical regions was addressed, where there was bidirectional transshipment between the locations at the same region, and unidirectional transshipment between the locations at the different region. Each location in the system faced isolated Poisson distribution demand and adopted continuous review (S-1, S) policy. According to the M/G/S/S queue theory, birth and death process model and approximate calculation thought, the inventory models for the loss sales case and backorder case were established respectively. A discrete event simulation procedure for the inventory system was designed to acquire the comparison benchmark. For each variation combination of system parameters, the comparative analysis of computation results for the approximate, simulation, policy simulation, unidiectional transshipment, and no transshipment models, were made. As a result, the fact that the expected total cost of the proposed mixed transshipment approximate model is minimal was found.

Key words: multi-location inventory system, unidirectional lateral transshipments, bidirectional lateral transshipments, loss sales, backorder